Better Than Cash: Kenya Mobile Money Market Assessment

November 2011 This report was produced for review by the United States Agency for International Development. It was prepared by Accenture Development Partners under the Global Broadband Initiative. The author of the report is Loretta Michaels.

DISCLAIMER: The authors’ views expressed in this report do not necessarily reflect the views of the United States Agency for International Development of the United States Government.

Table of Contents ACRONYMS ...... 3 EXECUTIVE SUMMARY ...... 4 SECTION I. INTRODUCTION AND PURPOSE ...... 6 SECTION II. CURRENT STATE OF KENYAN MOBILE MONEY MARKET ...... 8 SECTION III. HOW IS MOBILE MONEY BEING USED TODAY ...... 17 SECTION IV. USE OF MOBILE MONEY BY USAID PARTNERS ...... 29 SECTION V. KEY SECTORAL ISSUES AND CHALLENGES ...... 38

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 2 ACRONYMS

ABEO Agriculture, Business & Environment Office API Application Programming Interface B2P Business-to-Person CBK Central Bank of Kenya CALP Cash Learning Partnership DG Democracy and Governance EFT Electronic Funds Transfer ERP Enterprise Resource System FI Financial Institution GSM Global System for Mobile Communications ICT Information and Communications Technology m-banking Mobile Banking MFI Microfinance Institution MIS Management Information System MOF Ministry of Finance MNO Mobile Network Operator NGO Non-governmental Organization OFDA Office of Foreign Disaster Assistance OPH Office of Public Health P2B Person-to-business P2P Person-to-Person POS Point of Sale Terminal RTI Research Triangle Institute SACCO Savings and Credit Cooperative Society SIM Subscriber Identity Module SME Small and Medium-scale Enterprise SMS Short Message Service STK SIM Toolkit USSD Unstructured Supplementary Service Data USAID United States Agency for International Development WAP Wireless Application Protocol

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 3 EXECUTIVE SUMMARY

In the last dozen years mobile technology has flourished throughout the developing world faster than any other technology in history. With that growth comes an equally impressive surge of messaging services, providing not just a broadly used means of personal communications, but also a number of valuable information services, from agricultural data reports to healthcare reminders. The latest phenomenon spawned by mobile technology is mobile money. This trend is providing money transfer services to millions of previously under-served people in the developing world, allowing them to safely send money and pay bills for the first time without having to rely exclusively on cash.

The global leader in mobile money is Kenya, where mobile network operator Safaricom launched M-Pesa in 2007. Less than five years after launch, there are approximately 16 million users of mobile money in Kenya, conducting over 2 million transactions every day. M-Pesa is not only being used for standard money transfers and airtime purchase, but also to pay salaries, utility and other bills, and to buy goods and services at both online and physical merchants. Three other mobile operators have also begun to offer mobile money services in Kenya – Airtel, Orange, and Essar (Yu) – and other players have recently emerged to offer complementary services. In addition, many aid donors and their implementing partners have already begun to integrate mobile money into their programs and are at the forefront of this learning opportunity.

Given this unique learning laboratory for the use of mobile money, both generally and within aid programs, Kenya was chosen for a field visit by United States Agency for International Development (USAID) staff to better understand the use of mobile money today within USAID’s programs. The purpose of the trip was to interview partners to identify the various ways they were using mobile money and determine the key benefits and challenges they faced, with a view to forming an initial opinion of how USAID/Kenya might best support both the sector and its implementing partners in their efforts.

Based on our research and interviews, we observed the following about the state of the mobile money sector in Kenya:

- The focus of mobile money is primarily on driving its innovative uses within programs and businesses, rather than pure growth in usage. The sector already enjoys a great deal of support from government and other parties, and is currently experiencing phenomenal growth on its own. - Many of USAID/Kenya’s implementing partners are already using mobile money within their operations and for program delivery, to varying degrees. - Partners report that accessing corporate accounts is difficult and time- consuming, especially with Safaricom. This prevents the use of mobile

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 4 payments in operations and programs. - USAID/Kenya can support this sector by encouraging collaboration and providing general information and education to partners that are trying to implement mobile money. The level of knowledge of the programmatic support options available when implementing mobile money solutions (and the costs of those options) varies widely among USAID partners. - An area of concern to implementing partners is the degree to which USAID and other donors will accept electronic mobile money transaction records in place of current practices around physical signatures and paper receipts. Developing a consistent policy around these mobile money transactions would be of great use to partners.

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 5 SECTION I. INTRODUCTION AND PURPOSE

Two industries that have seen phenomenal growth and impact in developing countries in recent years are mobile communications and microfinance. Both are acknowledged today as major catalysts for economic growth and social development, bringing opportunities that did not exist before to urban and rural populations1. In the case of mobile telephony, operators are experiencing adoption rates that far exceed expectations, given the levels of literacy and technological sophistication in emerging markets. While the two industries have grown independently of each other and for different reasons, they share an important characteristic: they broaden the reach and coverage of their respective sectors - communications and financial access - into populations that could not previously access or afford such services.

It is therefore no surprise that efforts have been made to link mobile communications and microfinance through the development of mobile money solutions. The rapid growth of mobile payments technologies in the last few years, particularly in Kenya, South Africa, and the Philippines, has proven that there is latent demand for such services and that there is a willingness to adopt and pay for the technology among low-income users. At the same time, governments, banks and microfinance institutions (MFIs) have realized that extending financial services to the base of the pyramid via mobile technology can significantly lower the cost of delivery, including overhead costs for buildings and staffing branches, as well the costs to customers of accessing services (e.g., travel or queuing time, travel costs, security issues).

There are significant benefits to be gained by the use of mobile technology by financial services providers, especially in rural areas, in the form of cost savings, efficiency, fraud and error reduction, client security and convenience. However, many attempts around the world to do so are progressing very slowly, in some cases for reasons related to implementation or regulatory constraints or because providers initially focused on unsophisticated MFIs as partners2. Despite these challenges, there is a great deal of excitement about the possibilities of mobile money technology to extend financial services into underserved areas, and the successful performance of some of the current offerings provides a great deal of encouragement to efforts to prove the concept worldwide. Equally exciting is the fact that the ability to conduct financial transactions remotely is also proving beneficial to the operations of a number of non-finance related organizations, especially in the world of aid and development.

The market leader in the use of mobile money is Kenya. When mobile network

1 L. Michaels, A. Hammond, "GSMA Development Fund Top 20: Research on the Social and Economic Impact of Mobile Communications in Developing Countries," August 2008 2 See Appendix I for a brief discussion around the challenges faced by MFIs in early mobile money implementation efforts.

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 6 operator (MNO) Safaricom launched M-Pesa in 2007, it reached its first year subscriber targets in just two months, and growth has continued apace ever since. The reasons for M-Pesa’s success have been studied extensively, and observers generally agree on several contributing factors: a large underserved population with few alternatives for financial services; a demographic profile that saw significant numbers of adults migrate to cities like Nairobi in search of work, while retaining strong familial and financial links to their home villages; a trusted mobile network operator with significant market share and a broad agent network, relatively high mobile phone penetration at the time; and a regulator willing to take a “watch and learn” approach to the new service.

Four and a half years after M-Pesa’s launch, there are approximately 16 million users of mobile money in Kenya, conducting over 2 million transactions every day. M-Pesa processes transactions worth US$4.98 billion annually, translating to 17% of Kenya’s Gross Domestic Product (GDP)3. Compared to 1,072 bank branches, there are over 46,000 mobile money agents in the country4. Mobile money is not only being used for standard money transfers and airtime purchase, but is being used to pay salaries, utilities and other bills, and buy goods and services at both online and physical merchants. Three other mobile operators have begun to offer mobile money services in Kenya – Airtel, Orange, and Essar Yu – and other players have also recently emerged to offer complementary services. In addition, many aid donors and their implementing partners have already begun to integrate mobile money into their programs and are at the forefront of this learning opportunity. Given this unique learning laboratory for the use of mobile money, both generally and within aid programs, Kenya was chosen for a field visit by USAID staff to better understand the use of mobile money today and help inform its potential for use in USAID’s programs globally.

3 Zimbabwe Independent, “Econet’s EcoCash versus Kenya’s M-Pesa,” October 20, 2011. 4 Central Bank of Kenya 2010-2011 Annual Report

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 7 SECTION II. CURRENT STATE OF KENYAN MOBILE MONEY MARKET

Observation A. There are Four Mobile Money Providers in Kenya, but One Dominates

Currently the mobile money market in Kenya is dominated by one major player, Safaricom’s M-Pesa. Not only did Safaricom launch the first service, in 2007, but it still dominates the field, with an estimated 99% market share of all mobile money transactions in Kenya. (Table 1 below provides an overview of each of the mobile money services available in Kenya and the Appendices provide more detailed descriptions of each player.) Each of the mobile money players offer similar types of services, although the three newer service providers have tried to distinguish themselves in various ways, largely through their platform capabilities and service structures for corporate mobile money services. Many organizations want to offer their clients and customers the mobile money service provider of their choice when linking such services to their product offerings, but these services are not yet available. Therefore, for the time being, anyone looking to utilize a mobile money service in Kenya has little choice but to work with Safaricom, which has the largest network of subscriptions and agents.

Table 1: Mobile Money Providers in Kenya

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 8

Observation B. Mobile Money is Here to Stay

The success of mobile money in Kenya has been nothing short of phenomenal. In just over four years, a country with only 1,072 bank branches has seen the number of agent outlets providing mobile money service grow to 46,000. People have access to financial services as never before, such that the proportion of the population which is completely excluded from financial services is lower in Kenya than any other African country except for South Africa5. The key drivers of this financial inclusion in Kenya, most notably Safaricom’s M-Pesa and Equity Bank, center on a very supportive regulatory regime, innovative business models and technological advances, particularly in the mobile phone sector.

The issue at this point is no longer whether mobile money will survive in Kenya, but how to link this service into the greater financial ecosystem, as it’s clearly here to stay.

In a population of 40 million people, it is difficult to get a clear sense of how many Kenyan citizens are considered formally “banked.” A recent FinAccess report showed the number of formally banked people (defined as those using a bank, Postbank or insurance product) at 22.6% in 20096. One recent statement has the number of bank accounts at 5.5 million7, giving a banked ratio of 14%, while yet another public statement, that there are 14 million deposit accounts, would put the “banked” ratio of about 35%8. However one wishes to calculate it, it is clear that a good percentage of the population, at least two thirds, remains excluded from formal financial services. In fact, it is estimated that 95% of all financial transactions in Kenya are still cash-based. Of those that aren’t cash- based, it is estimated that 70% of these are handled by Safaricom’s M-Pesa mobile money service. Total registered mobile money accounts in Kenya number 18.6 million, although some of those are probably owned by users with multiple accounts, so it is safe to say that there are at least 16 million mobile money account holders in Kenya, or about 40% of the population, almost 60% of the adult population. It is also estimated that about 85% of Kenyans have used mobile money. In terms of mobile money market share, Safaricom’s M-Pesa has about 99% of the mobile money market, and therefore essentially defines (for now) what the market looks like.

M-Pesa has made a huge difference in the lives of the poor who have traditionally been excluded from the formal banking system. Bank products and fees have not typically catered to very low-income earners, nor have the poor felt the need or ability to use EFT. Culturally the poor have not felt welcome in banks.

5 FSD Kenya 6 FSD Kenya: FinAccess National Survey 2009 7 Safaricom statement, October 2011 8 CBK Governor’s Remarks at 3rd ICPAK Financial Services Conference, April 2011

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 9 As a result, most low-income Kenyans have operated on a cash-only basis, with little or no savings and no means of developing a credit history. A key financial transaction for many of Kenya’s citizens in recent years has been for a worker in Nairobi to send money home to family members remaining in home villages. The primary options for doing this have been via bank or postal transfer or to ask someone to carry it for them, either a friend or a taxi or bus driver, at high cost and high risk. (For small amounts, the fee as a percentage of amount sent can be higher than 35% due to the high minimum fees charged for every transfer9.) The introduction of the M-Pesa10 service in 2007, focused on the marketing slogan of “send money home,” touched a nerve and filled a big gap in the market. Kenyans consider M-Pesa a cheaper, faster and safer option for sending money, and one that is considerably more accessible than other options out there, such as bus, taxi, PostaPay or bank branches (see Figure 1, below). The fact that M- Pesa was launched by Safaricom, a highly trusted and popular brand in Kenya with about 80% of the cellular phone market at the time, only helped to support its rapid growth.

Figure 1: Money Transfer Behavior Before and After M-Pesa

Source: FSD-Kenya (2006) and FSD-Kenya (2009)

Currently, about 16 million Kenyans use mobile money to send money, pay bills, cover expenses, and buy goods. Besides money transfer and bill pay, it is estimated that 75% of M- PESA users also save at least some money in their M- PESA account, citing reasons of ease (45%) and safety (26%) as the major factors11.

9 Kabbucho, Sander and Mukwana, “Passing the Buck – Money Transfer Systems: The Practice and Potential for Products in Kenya,” Microsave-Africa, May 2002 10 “m” for mobile, while “pesa” means money in Swahili 11 Jack William and Tavneet Suri, “The Economics of M-Pesa”, MIT, August 2010.

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 10

Organizations are also increasingly using M-Pesa, formally and informally. Kenyan microfinance institutions (MFI) and insurance companies are increasingly using M-Pesa for cash disbursement and repayment; businesses, government and NGOs are using it for cash transfers, procurement and salary payments. Merchants are also using it for purchases, both for its convenience as well as its cheaper fee structure (M-Pesa charges 1.5% to the merchant, versus 3-4% on the part of most credit cards).

The value proposition for use of M-Pesa by organizations focuses on a number of benefits, including reduction of cash “leakage” and corruption; increased operating efficiencies, including less paperwork; better transparency and accountability via the electronic records, and more independence and self- sufficiency for users. In terms of quantitative measures, organizational users of mobile money are reporting reduced cost of cash disbursement compared to other current options, such as cost of cash handling and associated security, reduced staff costs and better utilization of staff.

In terms of innovations in mobile money, Kenya has proven to be a very fertile and supportive location. Not only is there a high literacy rate and a strong culture of entrepreneurship, but the government’s stand on allowing the mobile money sector to flourish, combined with the still considerably large underserved market, has meant a large opportunity and welcoming environment within which to operate for service providers and information and communication technology (ICT) developers. In fact, according to the World Bank, ICT (including mobile money) has been the main driver of Kenya’s economic growth over the last decade12. “Since 2000, the sector has outperformed all other segments of the economy, growing on average by 20 percent annually,” according to their recent Economic Update. “Since 2000, Kenya’s economy grew at an average of 3.7 percent. Without ICT, growth would have been a lackluster 2.8 percent – similar to the population growth rate – and income per capita would have stagnated. ICT has had a transformative impact on the financial sector and has contributed to important indirect economic effects in other sectors, such as health care and public information13.”

Observation C. Mobile Money isn’t Displacing (Most) Bank Accounts

As is usually the case when mobile money is introduced to a market, the Kenyan banking sector expressed its early opposition to the service, with concerns raised that Safaricom was engaging in a banking service for which it wasn’t licensed. While there are valid debates to be had with regard to mobile money versus prudentially regulated banking services, especially when the former is offered by a non-bank player such as an MNO, banking opposition tends to arise most

12 World Bank, Kenya Economic Update, December 2010, Edition No, 3, “Kenya at the Tipping Point?” 13 Ibid

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 11 loudly only when mobile money becomes successful, in large part to protect banks’ hold on the financial services sector. The issue of whether a mobile money service should even be offered by an MNO alone is one that has seen a tremendous amount of discussion and debate in the last four years. However, in Kenya as elsewhere the sector has moved beyond the basic “bank-led versus MNO-led” debate. The success of M-Pesa has reached such a level that the majority of Kenyan banks have decided to work with M-Pesa rather than compete with it in the mobile money market. The last two years have seen a series of banks offer services that link their accounts to Safaricom’s M-Pesa accounts, both on a personal level as well as a corporate level. These linkages vary from account information and transferring value from one account to another, to banks offering to handle all intermediation between their clients’ accounts and any Safaricom services they wish to access. Some banks are even offering to cover any risk or costs involved should funds be sent to the wrong mobile money account.

One area of discussion and concern amongst regulators and bank managers is whether the success of M-Pesa has led to it displacing bank accounts or otherwise hurting the banking sector. Some of this concern is competitive posturing by the banks, but it is a topic that policy makers pay close attention to as they monitor the sector. There has been little evidence to date, however, that mobile money accounts are replacing existing bank accounts. Mobile money services have cash transaction limits that prevent the service from being used for higher value transfers, so individuals and businesses are continuing to use their bank accounts at the same rate as always. EFT is still the primary means of most higher value money transfers14, particularly for businesses and organizations, and any organization that wishes to use mobile money to disburse salary or expense payments still needs to have a bank account linked to that mobile money account.

Rather than hurting the banking sector, the mobile money sector has in fact had positive effects on banks, according to many observers (see Figure 2, below). When M-Pesa took off, a large amount of liquidity that had been sitting in cash was routed and accounted for in the banking system, boosting bank liquidity15. Additionally, a number of organizations that use mobile money services with their constituents are opening up joint mobile money/bank accounts for them (e.g., M- Kesho, a service of Equity Bank and Safaricom). These new accounts are increasing business for the banks and opening up opportunities at the low end of the market, a sector that banks have traditionally ignored. However, the banks still have to develop and offer services that specifically cater to low-income customers if they’re to succeed in this space. Simply adding a mobile channel on

14 Very high value transfers, typically bank to bank, must be routed through the Kenya Electronic Payments & Settlement System (KEPSS), Kenya’s real time gross settlement system (RTGS) 15 M-Pesa agents must all have bank accounts from which to buy and sell e-value from the M- Pesa system, and all M-Pesa balance accounts are held in pooled trust accounts at prudentially regulated banks.

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 12 to existing services won’t help grow the market for bank accounts if they aren’t designed to meet the needs of the low-income customer. One area where banks do have a valid concern is where joint accounts are opened at the very low end of the market, largely for humanitarian cash transfers at the moment, and the recipients are merely using the M-Pesa wallet and not the bank account that was opened for them. How the banks address this issue is difficult to predict for a target population with so little wealth, but many observers believe the overall opportunity is the banks’ to lose at this point if they don’t design services suited to the poor.

Figure 2: Financial Access in Kenya

Source: World Bank estimates, 2010

As stated earlier, many if not most banks in Kenya are now linking up with mobile money systems in partnership with the MNOs, offering joint accounts, bulk payment services, merchant payments, and information services. Many of these banks are also offering to handle any intermediation required between businesses and the mobile money providers, so that business clients don’t need to do so. In these cases the banks work with the organization to validate their customer or employee data with the MNO, handle the transfers between the client bank account and the MNO, manage all record keeping between the various accounts and often take on the risk of any incorrect transfers. And they are doing it all for a “small” fee. Banks have shrewdly seen that many client

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 13 organizations want support in dealing with the minutiae of bulk mobile money accounts, and that support was not forthcoming from MNOs, especially Safaricom. Given the growing prominence of mobile money use in Kenya amongst organizations, this particular business opportunity is one that banks will only continue to exploit and grow.

Observation D. Government Plans to Increase Use of Mobile Money

All of the developments in the Kenyan mobile money and banking sectors are occurring in an environment of active support and encouragement from the Government of Kenya, which has chosen to focus on the role of ICT as a means of economic growth. This championing of the sector stems in part from the government’s strategy, outlined in its Vision 2030 blueprint document16, which stated an explicit government goal of becoming a “middle-income country providing a high quality of life to all its citizens by 2030.” Of the several foundational pillars that are listed in this document, three that are particularly relevant to the mobile money sector are Continuity of Governance Reforms, Enhanced Equity and Wealth Creation Opportunities for the poor, and Science, Technology & Innovation (STI). Each of these foundation topics involves the prominent use of ICT and cashless services as a key means of improving access to and delivery of government services as well as improving economic opportunity.

The government has already started implementing a number of initiatives in support of its goals, starting with open access to government data for all citizens. The Open Data initiative has set up a web portal17 for the purpose of sharing all government data with the public. The goal is to make core government data, particularly development, demographic, statistical and expenditure data, available in a useful digital format for researchers, policymakers, ICT developers and the general public. The government is also pushing for open source software in mobile applications, in part to help push prices down significantly enough to reach the poorest users.

A major player in the government’s plans is the ICT Board of Kenya, which is driving the implementation of many of the government’s goals in the technology and innovation space. There are 5 major programs of the ICT Board:

- Local Digital Content, including the use of government data and locally relevant service information; - Digital Inclusion, especially rural, where they intend to create digital villages (Pasha centers) in all 250 constituencies and provide connectivity and government services to citizens, instead of making people continue to come to Nairobi to conduct any sort of government business; for example, company registries are all online and cashless now;

16 Government of Kenya, Kenya Vision 2030, Released 2006 17 www.opendata.go.ke

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 14 - Government Applications, by increasing the use of ICT in government, including computerizing all processes and services; - Business Process Outsourcing, where they hope to generate employment and income through regional call centers; and - IT Shared Services.

The Permanent Secretary of the Kenyan Ministry of Information and Communications, Dr. Bitange Ndemo, has made clear the government’s commitment to the use of ICT across the Kenyan government and economy and is working closely with the other ministries to see that it happens. While he understands that completing this task will take time and come up against some entrenched interests along the way, he is convinced that the benefits to Kenya will be enormous. One early and striking example of the importance of this strategy is that the Ministry of Lands automated its cash collection function, thereby increasing cash collection from Ks 3 billion to Ks 7 billion in the first month. He also estimated that US $1 billion would be saved in one year if government procurement got automated across all ministries.

The focus on e-government and replacing cash are key elements in the government’s strategy and efforts to achieve this goal are already underway across multiple ministries. Crucially, the Ministry of Finance (MOF) has stated its intention to automate all payments and has requested each ministry to develop a strategy to replace cash in government18,19. Government data is being used to compare weather patterns and cattle mortality rates to provide information to agricultural insurance providers, while school performance data is being used to provide the public, especially parents, a source of information on their local schools. Meanwhile, a web portal has been created, in conjunction with the Teacher Services Commission, to provide information and services to the many government teachers in Kenya20, especially in rural areas; applications for leave must now be submitted through the portal. So far 16,000 teachers have logged on, and the government wants to add more to make the portal the central community spot for all teachers in Kenya (making them apply through the portal for leave helps boost participation and make them aware of other services to come).

An “End to End” government service strategy was drawn up in September 201121, looking at how to improve all government service delivery for its citizens, which will identify more opportunities for the use of ICT and cashless payments. All of these efforts will further strengthen the role of mobile money in Kenya and

18 Conversation with PS Bitange Ndemo of Ministry of Information and Communication, Nairobi, October 5, 2011. 19 Integrated Financial Management Information System (IFMIS) Strategic Plan 2011-2013, Ministry of Finance. 20 There are 250,000 government employees in Kenya, of which about 200,000 are teachers. 21 A World Bank funded project, being implemented by Accenture Development Partnerships.

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 15 expand its usage across all sectors of the economy.

Observation E. Regulation Will Continue to Support Mobile Money

The Central Bank of Kenya has made clear that it intends to retain its liberal approach to regulating mobile money, as it feels that this position is what has enabled Kenya to take the lead in this space. The last year and a half has seen the introduction of a number of new regulations that will codify the guidelines that the CBK has been informally enforcing, including a new set of consumer protection rules that were recently introduced to ensure more safeguards in the event of service provider insolvency. (See Appendix IV for a description of the current mobile money regulatory situation in Kenya.)

Policymakers believe that bringing more Kenyans into the semi-formal financial services sector through the use of mobile money has been highly beneficial to both citizens and the country at large, as the sector has spawned a number of related innovations and businesses. Going forward, the government’s goals are to not just increase the quantity of e-transactions in Kenya, but to increase the quality, meaning that they will aim to bring mobile money users into the greater financial ecosystem through formal services such as bank accounts.

Key policy questions that leaders are considering in this sector include increasing competition in order to drive access and reduce costs, interoperability, systems stability and safeguards against systemic risk. Regarding interoperability, the government has resisted mandating it for mobile money providers, not wanting to penalize the early adopter Safaricom and believing in a free market approach. The government has made clear, however, that interoperability is something it would eventually like to see22. This issue is particularly important at the agent level, where Safaricom controls over 28K agents across the country and insists that they remain exclusive to Safaricom when it comes to mobile money. The number of small businesses that are qualified and able to be successful mobile money agents is understandably limited, particularly in rural areas, and being able to control those points to the exclusion of other players is of concern to many in the sector. This topic is sensitive for banks in Kenya, as the new Agent Banking guidelines that were passed in 2010 finally allowing banks the use of non-bank agents mandated that such agents not be exclusive to one bank. Thus, in a sector where key players are quickly converging, the fact is that there is one set of rules for banks and another for MNOs.

The issues of systems stability and systemic risk are ones that the government is starting to look at more closely. There isn’t necessarily a specific concern on these points, but the regulator wants to ensure that it understands the systems and safeguards in place to ensure that they are adequate. The issue around systemic risk is largely focused on mobile money data records, rather than the safety of the pooled funds involved, as these funds are already held in

22 A study of payments system interoperability is being procured, according to the MOF.

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 16 prudentially regulated institutions, within tightly restricted trust accounts. No such requirements are in place for the data records that MNOs keep which identify accountholders and their balances. Given the wide use of mobile money across the population, should these records disappear for any reason, the government would face potential calamity. Each of the MNOs has built in redundancy within their mobile money platforms to protect the data, but legally there is no requirement that the data be held in separate trust for safeguarding. Policymakers plan to look at these types of issues to decide whether they wish to strengthen the guidelines for ensuring the safety and security of the system.

SECTION III. HOW IS MOBILE MONEY BEING USED TODAY

Any discussion of mobile money usage in Kenya today must start with a description of the standard capabilities of services in use. While there are a number of groups and organizations using mobile money in a variety of ways, the actual service offerings can be broken down into four basic choices, all of which are currently or soon to be offered by the four main mobile money providers:

1. P2P, or person-to-person. P2P is the most common means of using mobile money globally, in Kenya and other areas of the developing world. (In North America the most common usage would be mobile-accessed online banking via smartphones, but this type of activity is not the focus of this report.) In Kenya, 85% of all mobile money transfers are P2P, and they average between Ks300-400 each, with most being below Ks10,000 (about $100). In P2P, a user transfers value from his prepaid mobile wallet to another user’s mobile wallet. Typically a user would go through the following steps:

- Deposit value into their mobile wallet account by visiting a mobile money agent, who will take the cash from the user and credit their account with e- value accordingly. - Users can now send the money, or e-value, to whomever they wish, as long as that recipient has a mobile phone or access to one. Sending money to a registered mobile money user is the most straightforward transaction, and will be cheaper for the sender, although they can also send to non- registered users, but will pay a higher charge for doing so. (The mobile money operators determined early on that the person sending the money is likely to have some degree of influence over whomever they’re sending money to, and decided to charge the sender a higher fee, on the basis that it will be in the sender’s interest to persuade the recipient to sign up for a mobile money account.) - Once a mobile money user decides to withdraw cash from their mobile money wallet, they then visit an agent who would exchange e-money value for cash with that customer.

It is important to remember that all mobile money accounts are prepaid, and

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 17 that the amount of cash in the system must match the amount of e-value, so that a parallel currency isn’t being created. Any exchange with an agent is really just an exchange of e-value for cash, or vice versa. Therefore, the agent must have sufficient float, or e-value, on their own account in order to conduct transactions. Current transaction limits for P2P transfers are Ks70K (about $700), and users can receive up to Ks140K in transfers in one day. However, the individual mobile money wallet balance limit is Ks100K at any one time. A table of the P2P charges for each of the mobile money service providers is shown, below.

Table 2: P2P Tariff Comparison (as of October 2011)

Tariff KS 5,000 M-Pesa Airtel Orange yuCas Money Money h Deposit Money Free Free Free Free Send Money (Registered User) 30 25 30 Free Send Money (Unregistered User) 80 25 90 n/a Withdraw Cash (Registered User) 45 45 45 40 Withdraw Cash (Unregistered Free 45 Free 60 User)

2. B2P, or business-to-person, also called Bulk Payment Service in Kenya. This service allows an organization, whether it is a business, government ministry or NGO, to pay multiple recipients at one time by paying into their mobile money wallets. Because the vast majority of rural and/or seasonal workers across Kenya lack bank accounts, organizations have needed to find ways of delivering cash to pay salaries and expenses. Cash payments, especially large volumes of them, naturally carry with them a great deal of risk, not to mention expense and vulnerability to theft and corruption. Typically the organization would either enlist the services of an armored car and security team, costing a great deal of money, or they would have a staff member drive out with the cash in hand, with all the risks that entails (e.g., loss, theft by staffer, robbery). By using the Bulk Payments Service, they can avoid the risk and expense associated with cash by sending money directly to users’ mobile wallets. This also reduces the risk to recipients, who are no longer vulnerable to theft by virtue of the fact that everyone in town has seen the cash get delivered. The mobile wallet allows a degree of privacy and safety for users in this regard, and offers them the convenience of deciding when and where they wish to withdraw their cash. In terms of transaction limits, Bulk Payment recipients can receive up to a maximum of Ks100K. Key examples of this service are when partner programs like RTI International use it to pay seasonal malaria sprayers in their operating areas or other groups

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 18 use it to pay flower growers.

3. P2B, or person-to-business, also called Bill Pay Service. This service allows a user to pay a company using their mobile money account. A common complaint in Kenya and other developing countries has been the need to travel to the bill pay location, often the capital city, and stand in line for long periods of time to pay bills, resulting in extra expense for travel and productive time lost away from work. It is such an inconvenience that many people pay others to stand in line for them. The ability to pay bills using a mobile money account has proven very popular with both users and businesses, with over 700 organizations signing up to allow their bills to be paid via M-Pesa alone23. Many of these organizations are also offering the Bill Pay option via the other MNO mobile money services, to ensure non- Safaricom customers can use the service as well. The types of organizations using the Bill Pay Service include educational institutions, government agencies, hospitals, utility companies, and many others. One particular use of this service is by microfinance institutions (MFIs), which use the Bulk Payment and Bill Pay capabilities of mobile money in order to disburse and obtain repayment for their loans24.

4. A slight variant of the Bill Pay service is the Buy Goods function. The service is essentially identical to the Bill Pay Service, except that it can be used to buy goods from either online or physical merchants as needed, allowing individual (versus recurring) purchase payments, as opposed to signing up for individual accounts and paying off on those specific accounts, which is often the case with Bill Pay service. The Buy Goods Service is really a formalization of what had already been occurring in the market, where many vendors were allowing customers to pay for things using a P2P transfer. In the case of Buy Goods, larger vendors can link the payments to their POS systems so that they have a formal record of the sale, and in many cases can print a receipt of the sale for the customer. (This linkage is currently achieved by way of a SIM card and separate module for plugging into the vendor’s POS system.) So far, the takeup of the Buy Goods service has been somewhat low, in part due to criticism of Safaricom’s ability to service merchants and the specific functionality of the service, particularly its inability to quickly generate reports on any field of choice, e.g., by customer, product, store, etc. This is an area where some of the new players discussed below are looking to target.

23 A complete list of M-Pesa’s Pay Bill business clients can be found at http://www.safaricom.co.ke/fileadmin/M- Pesa/Documents/Utility_Organizations_11thMay2011.pdf. 24 In fact, the development of mobile money in Kenya started with a grant from DFID to Safaricom, back in 2003, to try and come up with a more convenient means of MFI clients, Faulu in this case, receiving and repaying their loans.

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 19 Table 3: Mobile Money Services in Market Today

Safaricom Airtel Money Orange Essar M-Pesa Money yuCash P2P √ √ √ √ Bulk Payments √ √ In pilot √ Bill Pay √ √ √ Buy Goods √ √ Joint Offer w/ √ (Equity) √ (Equity) √ (Equity) Bank Account* International √ Money Transfer Visa/Mastercard √ √ (“virtual”) * Bank account and mobile wallet are part of one service, as opposed to providing linkages between a bank account and a separate mobile money account.

While the mobile money market in Kenya has been dominated by P2P transfers since M-Pesa was launched in 2007, and P2P continues to make up the vast majority of transfers (about 85%), the corporate services described above are gaining traction with users and organizations25. In particular, the Bill Pay service, which allows customers to pay bills using their mobile money account, has proven extremely popular. M-Pesa alone provides Bill Pay accounts to over 700 organizations, from utility companies, healthcare facilities and educational institutions to financial institutions including microfinance organizations and SACCOs. A number of organizations are making innovative use of the Bill Pay feature, like SUWASA’s prepaid water meter pilot, which allows users to draw water from public boreholes using a prepaid token which is loaded with value via M-Pesa Bill Pay and paid to NAWASCO water service. A similar service is offered with the Grundfos LIFELINK water pumps.

The Bulk Payment service has also grown substantially since being developed in 2010 (in collaboration with Concern Worldwide, which was seeking a better way to make cash transfers in urban slums), and is now in use by over 300 organizations. These organizations, which range from East African Breweries to government teachers groups to a number of humanitarian organizations, use the service to pay salaries and expenses for remote and seasonal workers, without the need to deliver cash and incur all the risks that entails. More innovative uses of the Bulk Payment service also include things like payments within the agricultural value chain, for example when dairy coops use mobile money to ensure farmers are paid faster for their milk (a service that is occurring within USAID/Kenya projects). The typical payment cycle took about 4-5 weeks for them to get paid, during which time they had no money to buy supplies or pay

25 For a list of documentation required for opening a key corporate account with Safaricom, please see http://www.safaricom.co.ke/fileadmin/M- Pesa/Documents/REQUIRED_DOCUMENTS_FOR_KEY_ACCOUNTS.pdf

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 20 bills. Now the coops have instituted a mobile money system to shorten the cycle for payment, and also make individual farmers’ mobile money balance information available at the coop store, so that farmers can buy supplies with their e-money accounts and get change in cash.

The Bulk Payment service is also being increasingly used by emergency relief groups, including Oxfam, WFP, ActionAid, FAO and USAID’s Food for Peace program and Horn Relief implementing partner, to make cash transfers into disaster areas, such as this year’s drought-stricken regions. It is not a complete solution for these groups, given the spotty mobile network coverage in their areas of operation, but where they can they are employing it.

While the Bulk Payments service is still dwarfed, in volume and in value, by the P2P service, it is growing in importance in the sector, both to users and to Safaricom’s competitors who see an opportunity to exploit a service that Safaricom developed and for which Safaricom is regularly criticized for not servicing well. For example, Safaricom often takes several weeks to a few months to even open a Bulk Payment account, and refuses to negotiate tariff fees for large volume bulk payments, whereas the other MNOs have all indicated that they were open to tariff negotiation. Safaricom, for its part, sees the opportunity and the competitive threat and would like to increase its B2P and P2B business by 10% year over year, with a goal of reaching a split of 60% P2P business and 40% corporate accounts.

Financial Institutions Jumping on the Mobile Money Bandwagon

As the usage of Bulk Payments has grown, a number of financial institutions (FIs) have also decided to get formally involved, either in using the services for their own requirements or in providing it on behalf of their corporate clients. These banks’ services range from merely linking to the M-Pesa system for information and money transfer between accounts to handling the entire interface between organizations and Safaricom, including mobile money account validation, bulk transfer instructions and reporting, and assumption of liability for any incorrect transfers. At last count, there are 10 banks in Kenya with linkages to the M-Pesa system, with two more coming on board soon26.

Current bank linkages with M-Pesa, however, are less about “innovation” and more about “adaptation” by financial institutions for linking to the M-Pesa platform27. Only two institutions have designed new products specifically and exclusively available on the M-Pesa platform (M-Kesho, I&M’s Prepay Safari Card), and two more institutions have built their business model completely

26 Conversation with Safaricom staff, October 2011; banks include KCB, CBA, NIC, Family, Citibank, I&M, Equity, and Stanbic; those coming on stream soon are Barclays and Standard Chartered. 27 Microsave Briefing Note #93, Innovation and Adaptation on the M-Pesa Rails, May 2011

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 21 around M-Pesa (Musoni, Changamka). The majority of financial institutions have only linked their systems at the back-end with Safaricom and are offering their existing products through M-Pesa as an alternative delivery/service channel. However, even with Equity’s M-Kesho offering, the interface is limited and evidence may show that it doesn’t allow users to enjoy a full mobile banking experience via M-Pesa.

Additionally, financial institutions have linked to M-Pesa’s “Bill Pay” platform to facilitate deposit by their customers into accounts with the respective institution. These Bill Pay links, however, are not seamless; withdrawal by a customer from his/her bank account through M-Pesa requires the work of two technologies. First is the bank’s own m-banking platform and second is Safaricom’s Bulk Payment service. There is usually a fee charged for both elements of the transaction.

In terms of early financial product innovations, there are two key ones to note: M- Kesho and the M-Pesa Prepay Safari Card. M-KESHO, launched as a joint product by Equity Bank and Safaricom, is probably the best known innovation in the list of savings products available using M-Pesa. This product, aimed at all income levels, is available through the M-Pesa platform and customers can register at select Safaricom outlets or at Equity Bank branches. Benefits to customers include:

- The ease with which money can be moved between an M-Pesa account and M- KESHO (a bank account) in Equity Bank via a mobile handset. - The money is protected through the bank’s participation in the national deposit protection fund. - Mini account statement and balance are sent to customers via SMS and can be viewed on screen. - It comes with (almost pre-approved) micro credit and insurance bundling (subject to conditions).

Since M-Kesho was introduced, a handful of similar products have entered the market, increasing the competition for mobile bank accounts. Family Bank has introduced PesaPap, and Kenya Commercial Bank has introduced KCB Connect, both in conjunction with Safaricom (but are planning to extend the services to all other mobile money providers). Equity itself has partnered with Orange Money to create a true mobile banking platform, with full integration of mobile banking and mobile money services. Unlike M-Kesho, where you link your M-Pesa account to your Equity account and have to move money between the two accounts, Orange Money is a single account; If you sign up for Orange Money you are opening an Equity Bank account with full access to Equity’s range of services. This looks very much like a “bank-led” mobile money model where the bank offers the deposit account and the mobile network operator provides access to their network for the movement of money between users’ bank accounts. This model holds risks for the network operators, who give up substantial control of the product. However, it helps create a more seamless experience for users and

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 22 opens up access to other financial services not available to the average M-Pesa user.

I&M Bank’s M-Pesa Prepay Safari Card, an international pre-paid VISA card, is aimed at a higher-income target market. The card can be pre loaded in Kenya Shillings through M-Pesa only, and can be used at over 1.7 million Visa ATMs and 28 million VISA merchant outlets worldwide. The I&M pre-activated card costs Ks250 ($2.5028) and each top- up costs Ks125 ($1.25). Withdrawal from I&M and Kenswitch ATMs costs Ks30 ($0.30) and Ks100 ($1.00) from Pesa Point ATMs. Withdrawal from Visa ATMs outside Kenya costs Ks250 per transaction. There is an annual fee of Ks250. The customer can surrender the card any time and get a refund of the remaining balance, after deduction of administrative charges, from any I&M Bank branch.

In recent weeks, Airtel Money has announced its own innovation in this space, in conjunction with Standard Chartered Bank and MasterCard. Dubbed “Pay Online,” it is the world’s first virtual card that operates off a mobile wallet linked to Airtel’s mobile money service and running off of MasterCard’s online transaction platform29. The service is available only to registered Airtel Kenya clients who will be able to make online purchases from any site where MasterCard is accepted. Airtel customers request a one-time virtual card number with the amount of purchase value needed, which must be available on the customer’s wallet. The Airtel platform will then generate a special 16 digit number that can be used for online purchases that take MasterCard account numbers, and the number must be used within 24 hours.

New business model innovations around M-Pesa include Musoni MFI, the Changamka Prepaid Health Cards and the Kilimo Salama crop insurance product. Musoni’s disbursements and loan repayments are made solely through the M-Pesa channel using the deposit (Bill Pay) and disbursement/withdrawal (Bulk Payment) channels. To improve technological performance, Musoni’s middleware takes care of proper identification of individual customer account for each loan repayment and also ensures timely and proper upload of data to the Safaricom Bulk Payment link for smooth disbursements. The cost of loan repayment for the client is Ks20 ($0.20) per transaction. M-Pesa charges Ks30 ($0.30) for each transfer from the M- PESA account, but Musoni bears Ks10 ($0.10) of this on the customer’s behalf. Disbursement through M- PESA is free for the customer – again Musoni pays Safaricom Ks30 for each loan disbursement; and the customer pays a minimum of Ks25 ($0.25) for each withdrawal from an M-Pesa agent. The total cost of a “round trip” cash in/out costs the client $0.70 and Musoni $0.40.

28 Current exchange rates between the US$ and Kenya Shillings are fluctuating daily, so an average of Ks100 to $1 is used in this report. 29 W. Mutua, “How Mobile Money is Bridging the Gap to Online Payments in Kenya,” memeburn, September 26, 2011.

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 23 Healthcare provider Changamka is appointing agents to sell its health cards, which consist of prepaid health cards that cover a predetermined set of health services at designated health service providers, plus a newer card that’s been developed to cover maternal and neonatal health costs. These agents are small outlets, a chain of supermarkets and other individual NGOs and business places. A customer can top up the card by transferring money via M-Pesa; others can also top up cards on their behalf. The customer pays Ks20 to Safaricom for each top up. This charge is irrespective of the amount transferred by the user from his M-Pesa account to his Changamka account. Changamka does not charge the customer for topping up, but rather pays Ks10 for each transfer to Safaricom, to offset the Ks30 that Safaricom would usually charge the M-Pesa account holder.

Kilimo Salama Plus is a crop insurance product developed by the Syngenta Foundation for Sustainable Agriculture and UAP insurance company. Debuted as a pilot in 2009, Kilimo Salama is an index-based insurance product that covers the risks associated with rainfall variability. Using a series of solar weather stations that send out data on rainfall levels, sun and temperature every 15 minutes, payouts are determined by comparison to historical regional rainfall patterns and based on a deviation from the normal rainfall index, as opposed to being based on crop damage after the harvest which can take months to assess and is subject to all sorts of manipulation and dispute. Each farmer who buys insurance is linked to the nearest weather station (no one is more than 20 kilometers from a station). If the weather station shows that the rainfall was insufficient early in the growing season, or too late in the corn season, all the farmers in that area get an automatic payout — farmers do not have to file a claim. If the rainfall was only slightly off, farmers would get a small payment. If the weather was extreme enough to destroy their whole harvest, they would get the full amount. No farm visits are necessary. The policies are sold in the same stores where farmers buy their seeds, fertilizers and chemicals. The shop owner is given a camera phone to record the purchase, which instantly sends a confirmation text message to the buyer, and the individual, small premium payments are collated at the store and sent via M-Pesa to UAP. At the end of the growing season, payouts go electronically to the farmer’s M-Pesa account.

Most financial institutions that get involved with M-Pesa are offering a link to their existing products through the M-Pesa channel, trying to harness Safaricom’s wide agent network. While transacting over the M-Pesa platform, the customer is bound by the limits of amount that can be transacted on M-Pesa channel – the minimum being Ks50 ($0.50) and maximum being Ks70,000 ($700). For example, if a customer of CIC M-Bima Jijenge savings plan saves Ks20 ($0.20) per day for deposit into M-Bima, since he is using M-Pesa for money transfer to CIC, the transfer would occur weekly and be for Ks140 ($1.00). CIC does not charge its customers for transfer into the M-Bima account, and even bears the Safaricom charges of Ks30 for each transfer.

A large number of financial institutions have opted for Safaricom’s “Bill Pay”

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 24 option to allow their customers primarily to deposit into their savings/ insurance/ pension/ investment accounts. Some of the more popular ones appear to be: PesaPap (from Family Bank); Pata Cash (from Kenya Post Office Savings Bank) and KCB Connect (from Kenya Commercial Bank). Deposit-taking microfinance institutions Faulu and SMEP have also entered into agreements with Safaricom. Their clients can repay loans and deposit into their savings account using the Bill Pay option of M-Pesa. Faulu has launched withdrawal service as well via M- Pesa, while SMEP is in the pilot test stage.

In terms of customer economics and satisfaction regarding “banking” via M-Pesa, it is less expensive to save in an M-Pesa account than shifting money to a bank account. This is because cash-in at M-Pesa agent is free for the customer, but transferring money (deposit) to a bank account costs varying amounts. Similarly transferring money from bank account to M-Pesa (withdrawal) itself costs the customer, and adding the cash-out charges makes it still costlier. The whole cycle of deposit and withdrawal (or indeed loan repayment) through M-Pesa therefore becomes an expensive proposition for the customer when done through a bank. This is highlighted in the table below.

Table 4: Comparison of Bank and M-Pesa Costs

Minimum charges Minimum charges Total charges for one for deposit using M- for withdrawal using deposit & one withdrawal Pesa (Ksh) M-Pesa (Ksh (between Ks 100-Ks 2,499) Institution Into Transfer by Out from Cash-Out Total  accounts M-Pesa account by by M-Pesa Charges by institution  institution M-Pesa ------Free ------25 25 M-Kesho Free Free 30 25 55 Family Bank 35 20 60 25 145 KCB 20* 20 60 25 145 Postbank Postbank 20 70 25 105 SMEP DTM 1 (for 30 Free** 25 56 SMS)

* KCB has an additional band of Ks100-1,000 for which customer is charged Ks20 and between Ks1,000 and 2,500 customer is charged Ks30 for deposits. ** For withdrawal of loans disbursed.

These costs will probably deter urban clients from accessing their bank accounts through M-Pesa more than their rural counterparts. The proximity of bank branches makes the fee structure unattractive for urban users. However, rural users may compare the cost of transacting through M-Pesa to other costs (travel, opportunity cost, risk of carrying cash etc.) and find it more favorable. Nonetheless, customers typically find charges levied for deposit and withdrawal

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 25 “fair” in interviews30. They value the convenience and accessibility of M-Pesa agent points for transacting in their bank accounts. They also like the ability to withdraw from their bank account using an M-Pesa agent point in times of emergencies. But about 75% customers also told researchers that they have faced issues of delays in receiving money into their M-Pesa account when transferring it from the bank account, severely limiting their ability to withdraw when they needed the money31.

At present financial institutions appear unsure about the overall costs and benefits arising out of their partnerships with M-Pesa. Most are sorting out the operational issues due to integration challenges and difficulties of communicating the proposition to customers. While it’s assumed that the linkage between mobile money and banking will continue to grow, how it evolves over the coming months and years is difficult to predict.

Small businesses are starting to look to mobile money for developing and enhancing their own service offerings. Water-pump vendor KickStart has developed a layaway program for customers, whereby customers are allowed to pay an initial deposit of Ks500 and then a series of small payments, via M-Pesa, for purchase of products. The company provides SMS confirmations to customers upon receipt of payments, showing the most recent payment and their account balance, and also provides monthly SMS reminders. Using Safaricom’s Bill Pay service, KickStart splits the transaction fees with customers, whereby the user always pays Ks20 per transaction, and KickStart pays the balance, which varies upon the value of the money sent. (Most transactions are below Ks1,000, so the Safaricom fee of Ks30 is split 20/10, where Kickstart pays Ks10; as the values go up the fee goes up, to a maximum fee of Ks50, of which KickStart would pay Ks30, leaving the customer to pay the remaining Ks20.)

KickStart has so far acquired 126 layaway customers, many of which they feel wouldn’t have been able to afford a pump otherwise, and have substantially increased the number of women buyers through the program. Other small businesses, such as solar lamp vendor Tough Stuff, are looking to develop a similar mobile money based layaway and “rent to buy” services and we anticipate seeing at least a few more service offerings from other companies in the next 6- 12 months.

Technical Requirements in a Mobile Money Ecosystem

In terms of technology requirements for use of mobile money, they are fairly straightforward for individual users, and get a bit more complicated for corporate users. Mobile money applications reside on the user’s SIM card within their cellphone; this type of application is commonly referred to as SIM Toolkit, or STK. This is the only interface available for the M-Pesa system. There is some

30 Ibid 31 Ibid

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 26 limited use of USSD32 for linkage to bank sites, but that’s about it; USSD is an expensive channel in Kenya and not very user friendly, so the MNOs aren’t as keen to employ it if they don’t have to (Airtel, in fact, has a policy of never opening its USSD channel to outside parties). The other MNOs are introducing additional interfaces besides STK, including WAP and Java33, largely as a means of differentiating themselves from Safaricom and being prepared for more advanced smartphone users, but so far the STK interface remains the most popular. As such, development partners wishing to implement mobile money solutions of their own will have to assume the use of the STK interfaces provided by the mobile money providers if they wish to reach a broad audience. There is no impact on the inner workings or systems of development partners.

The more challenging technical aspect of mobile money, for corporate users, is the issue of integration into the M-Pesa platform. When Safaricom developed the platform, it was a proprietary system, with no future plans for integration into other systems outside of the MNO and therefore no APIs for easy integration34. However, with the huge success of M-Pesa and the growing demand for linkages into it from other entities, Safaricom is under increasing pressure to make integration easier. Nonetheless, despite ongoing promises from Safaricom for an “open” API, there has been little evidence that one is forthcoming any time soon. Safaricom claims that if a corporate client wants integration into their back office, it should only cost around $200 to do this via an additional device that can be fitted with a SIM card and plugged in to their own system. However, other groups we spoke with spent considerably more than $200 to directly integrate the Safaricom service into their enterprise resource planning (ERP) systems35, to the tune of around $10-15K in one case. As a result, a new ecosystem of service providers focused entirely on making integration into M-Pesa easier for entities is emerging in Kenya.

The new players in this M-Pesa ecosystem include payment gateways providing

32 Unstructured Supplementary Service Data (USSD) is a protocol used by GSM cellular telephones to communicate with the service provider's servers. It was not originally developed to be a user-interfacing service link, and is considered an inferior and expensive customer communications tool. It is also less secure than other protocols, so less attractive for mobile money purposes. 33 WAP is Wireless Application Protocol, a technical standard for accessing information over a wireless network; a WAP browser is a web browser for mobile devices. Java is a popular programming language, particularly for client-server web applications, including mobile applications. Both standards can be used in newer smartphones only, unlike USSD or SMS, which are available in all basic handsets. 34 An application programming interface (API) is a particular set of rules ('code') and specifications that software programs can follow to communicate with each other. It serves as an interface between different software programs and facilitates their interaction, similar to the way the user interface facilitates interaction between humans and computers, or that peripherals such as printers speak to computers. When a service platform lacks an “open” API, it means that any other program wishing to communicate with the service must build a custom interface 35 Automated software systems that integrate internal and external management information across an entire organization, embracing finance/accounting, manufacturing, sales and service, customer relationship management, etc.

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 27 intermediation at merchants for bill payment across all mobile money providers & credit cards, such as PesaPal. There are also integrators that allow people to operate multiple accounts across mobile money providers and banks, as well as merchants and e-commerce sites, such as Mobikash. Within the B2B space, there are a number of middleware providers building platform integration systems between banks and mobile money providers (e.g., Cellulant, Elma, Kraft Silicon), while increasingly we’re seeing the emergence of other types of SME/MFI service providers that are popping up with linkages to mobile money service providers (e.g., Kopokopo). (See Appendix VI for a list of current mobile money ecosystem service providers in Kenya.)

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 28 SECTION IV. USE OF MOBILE MONEY BY USAID PARTNERS

USAID/Kenya’s operations are organized by key program sectors, which encompass USAID’s various operating areas, both for Kenya and the region. It was the implementing partners within these sectors that this Assessment Trip attempted to meet with for purposes of ascertaining their use of mobile money in their program delivery and operations. These program sectors are as follows:

USAID/Kenya: • ABEO (Agriculture, Business & Environment Office) • OPH (Office of Public Health) • DG (Democracy & Governance) • PDA (Program Design & Analysis) • OTI (Office of Transition Initiatives) • EDY (Education and Youth)

While the purpose of this trip was to engage the USAID/Kenya staff and their implementing partners, the team also met with members of the USAID/OFDA/ECARO (East & Central Africa Regional Office), as well as selected staff members from the following regional offices for USAID/East Africa (EA): • PDI (Program Development and Implementation) • RFMS (Regional Financial Management Services) • RAAO (Regional Acquisition & Assistance Office) • RCMG (Regional Conflict Mitigation and Governance)

A comprehensive list of USAID/Kenya’s implementing partners was not available from the mission, nor was there time to meet with all of them, but the team did meet with a select sample of partners (and non-USAID organizations) who were either using mobile money or planning to do so. (See Appendix II for a list of which organizations and individuals were interviewed on this Assessment trip and Appendix III for a description of how partners are using mobile money.) The purpose of interviewing the partners was to identify the various ways in which they were using mobile money and determine the key benefits and challenges of the service, with a view to forming an opinion of how USAID might best support its partners in their mobile money efforts going forward.

There was no specific correlation between sector or organization size and use of mobile money in Kenya. Implementing partners were all familiar with mobile money, either through their own personal use or within their organizations, and many of them were using it for program delivery and/or internal operations. Table 5 below lists those who were interviewed and said they were using mobile money, but this isn’t an exhaustive list. A more complete and comprehensive survey of USAID’s implementing partners in Kenya would likely elicit many more examples of mobile money use.

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 29

Table 5: Examples of USAID Partners Using Mobile Money

ABEO DG OTI OPH EDY OFDA TIST CGD KTI RTI Yes Youth Food for Peace Can NRT IED Intrahealth Horn Relief FIRM PACT AMPATH KDLP MCHIP One Acre Fund

The primary reasons for using mobile money by the implementing partners were to: - Make salary payments to remote and seasonal workers; - Provide cash advances for such items as per diem, transport and petty cash requirements; and - Distribute payments as part of humanitarian cash transfer programs, particularly as part of this year’s massive drought relief efforts in the North of Kenya.

In addition, MFIs are using mobile money for loan disbursement and repayment, while other groups are using it to facilitate faster and easier payments for products and services (e.g., crop insurance, prepaid water meters, etc.). A good example of the benefits derived from using mobile money in their program delivery is illustrated on the next page for MFI Juhudi Kilimo.

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 30 Case Study: Juhudi Kilimo MFI

Who: ABEO MFI partner that provides asset financing and technical assistane to smallholder farmers and small-to-medium agro-business throughout Kenya

• Cash needs include loan disbursement and repayment

• Cost comparison before and after using M-Pesa:

Benefits:

• Faster loan disbursement (money transferred in 2 days from application submission, versus 7 days currently) • Reduce distance (and risk) for 'cash in transit' • Real tim back office procession (average posting time cut down from 5 days to 5 minutes) • Zero errors in back office processing • Reduced distance (and risk) for 'cash in transit'

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 31 Most of the mobile money distribution by the implementing partners was conducted via Safaricom’s Bulk Payment service (and in some cases via P2P, for those partners that were unaware of the Bulk Payment service). The partners using Bulk Payments tended to be those organizations that had large numbers of staff in rural and remote areas needing payments for whatever reason, and the use of mobile money was the fastest, safest, and cheapest means of doing so. For those partners that also needed to be paid themselves on a somewhat regular basis, such as MFIs, the Bill Pay capability was another element of their service offering to end users.

All the partners using mobile money believe it has vastly improved their program delivery and operations, in a number of ways. They find it easier, cheaper (see Table 6, below) and more convenient to use mobile money for bulk payments, and also much faster than normal payment methods. In Kenya, checks can take up to four days to clear36, and even EFT transfers can take up to a day or two, particularly when sending from one bank to another. For those partners that need to get money to their employees quickly, going via the normal bank route has often been shown to take too long.

Table 6: Cost Comparison of Money Transfer Fees M-Pesa Postapay Check EFT Clearing Cost of a Ks30 Ks150 Ks100 Ks50-300* money transfer * EFT charges range from Ks50-100 within the same bank, and Ks300 for transfer to different banks.

Sending mobile money, however, has proven to be much cheaper than cash or in-kind (e.g., food) deliveries, by far (see Figure 4 Case Study, below). For remote bulk payments, where bank branches are a long distance away or non- existent, organizations have typically had few options available. One is to hire an armored vehicle and security staff to transport the cash to its intended location and have additional staff on hand at the other end to supervise its distribution to recipients. The other is to have a central office staffer, often a finance officer/staff member, carry with them large amounts of cash out to the field, with the same issues of physical distribution and security at the other end. In both scenarios, the organization incurs a number of costs and security challenges, including vehicle hire, high fuel costs, the cost of sending staff members out (including opportunity costs of having them away from the office), and the cost of extra staffing where needed for security. In addition, there was a clear, palpable discomfort among staff associated with handling large amounts of cash, especially in rural areas, as they frequently ran the risk of harassment. In recent years some banks, particularly Equity Bank, have offered cash distribution

36 Kenya has recently introduced a check truncation policy, which will reduce the number of days for check clearance from four to two.

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 32 services in remote areas, but in these cases they’ve had to deliver the money to the nearest branch in the nearest town, meaning the partner organization still faced a number of “last mile” delivery and distribution requirements and the associated costs.

Figure 4: Partner Example: PACT

Case Study: PACT Kenya

WHO: DG partner running Kenya Civil Society Strengthening Program – activities include workshops, focus groups, training and support around conflict resolution • Cash needs include per diem and travel reimbursements for participants • Previously, would send a finance staffer into the field for each workshop, to carry cash and obtain confirmation & receipts of disbursements. Costs included:

–Salary for Finance Staffer (3 days) Ks 6,000 –Vehicle Hire Ks 7,000 / day –Fuel Ks 12,000 –Accommodation Ks 7,500 –Total Cash Disbursement Costs: Ks 46,500

• Started using M-Pesa last month to pay participants, engaging CBA bank, Safaricom and Airtel to disburse payments for workshops. Costs include:

–Transaction Fees of Ks 75/transaction, for 50 participants Ks 3,750

•Benefits –Cost reduction of over 90% for paying workshop participants –Reduction in staff risk by eliminating travel with cash –Improvement in planning & efficiency by having to arrange transfers ahead of workshops

While the issues of cost and speed are critical and usually primary for partners when considering the use of mobile money, they’re not the only benefits for the organizations involved. Additional benefits reported include:

- The reduced paperwork that they need to deal with now has improved their efficiency, and that having to plan ahead on the electronic payments has also forced them to improve their overall management efforts. - The ability to distribute funds from a central headquarters has improved accounting and control and has reduced the number of hands that cash must go through. - The use of mobile money is far more convenient for their employees and beneficiaries, who can receive their payments on their phones, privately, and cash out at their convenience at a nearby agent of their choice whenever they wish.

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 33 - Another benefit raised, by the Democracy & Governance partners, was their particular desire to not carry cash with them as they delivered their services around voter registration and elections observation, for the reason that they didn’t want to be perceived to be trying to “buy” votes or engage in voter influence during elections and referenda.

In some cases, organizations are seeing greater uptake of their services when delivered via mobile money. A prime example from a non-USAID partner organization is Changamka’s prepaid healthcare vouchers and maternal-child health services, where recipients have the peace of mind of knowing they have got the money to cover the services on offer and therefore do not hesitate to use them.

Some partners, like AMPATH in Eldoret, are not only using mobile money for their programmatic and operational needs, but they have decided to set up a separate business as an M-Pesa mobile money agent within their health center, for purposes of providing greater convenience to their clients.

One area that partners all agreed would benefit from mobile money, but had not yet implemented, was for paying low value operating expenses within the organization, such as for office supplies, cleaning services, etc. While this is an area of large volumes of transactions for most organizations (one group estimated that about 80% of their transactions were small petty-cash type payments, but that the total value of these transactions amounted to only about 5% of the value of the organization’s expenses), unless the recipients had either Bill Pay accounts or personal M-Pesa accounts, it wasn’t easy to pay them and get any sort of receipt for the payments.

Mobile money, while it brings lots of benefits, also presents its own challenges to organizations attempting to use it (see Table 7, below). These challenges vary according to the size of the organization and the sector it is operating in, and may be a reflection of the sophistication and specific needs of different sectors.

SMEs, like water-pump vendor KickStart, and larger NGOs and companies want platform integration with Safaricom’s M-Pesa platform for financial control and integrity purposes. When it comes to Bulk Payments, Safaricom makes available to the client a password-protected web interface through which they can see records of their M-Pesa payments, and download these records either in PDF or spreadsheet form, for inputting into the client’s own MIS or ERP systems 37. If individuals within the organization have access to the records before they are input into the accounting systems, there is an opportunity for data manipulation that is unacceptable to more sophisticated organizations. Obtaining direct integration into Safaricom’s M-Pesa platform, however, is very difficult and costly to achieve because it will always require customer integration work. The M-Pesa

37 Bulk payment records must usually be inputted manually, or via the use of an Excel Macro program that can take the information and format it to the organization’s MIS system.

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 34 platform was built as a stand-alone proprietary system, and as such it does not make its data available to other programs through open APIs, so that each and every integration project becomes a costly one-off solution.

Table 7: Partner Benefits and Challenges of Mobile Money

Benefits of Mobile Money Challenges of Mobile Money Faster, easier, safer Working with Safaricom difficult Cheaper than alternatives Platform integration Reduction in paperwork Remote mobile network coverage More convenient for beneficiaries Ensuring agent liquidity Helps promote uptake of services Not all recipients have National ID Becoming agents is profitable business Training for new/illiterate users Obtaining signed receipts Recourse for mistaken payments

Many organizations claim that Safaricom is difficult to work with, in that it is slow to respond or deliver service, inflexible about making any changes to its services, and refuses to negotiate bulk tariffs, even for very large volumes of transfers. Not all organizations feel this way, however, and the differing opinions on this point may reflect differing expectations on the part of the client organizations. Some want more customized service and attention, both technically and personally, whereas others are satisfied enough with what they are able to achieve with Safaricom’s current set portfolio of services that they haven’t asked for even minimal changes.

For client organizations operating in very remote areas, particularly the humanitarian organizations trying to distribute cash transfers to drought victims in the north, the challenges of using mobile money are somewhat different. In these remote regions, mobile network coverage is either very spotty or non-existent, so that other solutions are needed to deliver money to recipients. In some cases, organizations such as Oxfam are training local traders in the region to act as agents, and using the nearest bank branch (which may still be hours away) to receive the cash into the trader’s bank account, whereby the trader needs to travel to the bank branch to obtain the cash and then travel back for distribution of the payments. Safaricom has a few truck-loaded Base Transceiver Stations (BTS), which can be driven to remote areas needing temporary coverage, but these are inadequate for the needs of the many emergency relief organizations requesting the coverage.

Along with mobile network coverage is sufficient mobile money agent coverage, and adequate agent liquidity for when large volumes of transfers are made to specific areas. While there have been occasional problems in this area in recent years, Safaricom has generally done a good job of planning ahead for such contingencies with its corporate clients, so major problems are few and far between. A separate but related issue is that of M-Pesa system outages, which

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 35 some partners feel is a problem, especially on Fridays when a lot of transactions are occurring and straining the Safaricom system.

Another challenge of delivering cash transfers to the most remote areas is that many of the recipients lack a National ID. The government is trying to rectify this quickly as it would like to have a complete voter list in advance of next year’s elections, but the issue still remains. A similar problem in these areas is that many people do not own phones, either because they can’t afford them or because the lack of mobile network coverage makes it pointless. Several NGOs tried instituting a policy of letting beneficiaries nominate “proxies” – usually family members or trusted members of the community who could receive the funds on their behalf. However, many of these same NGOs have decided to stop using this proxy system, as too many recipients were complaining of not getting all or some of their money. In these cases, the organizations opted to give the beneficiaries SIM cards or IDs of their own with which to receive and withdraw their funds at an agent location or for physical cash distribution where there was no mobile coverage at all.

All the organizations we spoke with have a concern about the need and ability to obtain written receipts for the payments they distribute. In all cases they wanted the recipients’ signatures for the benefit of their parent organization or donor requirements, not because they felt they needed it themselves. Even though the organizations felt confident of the electronic records they received from Safaricom, they were concerned about not contravening any control or audit requirements that may come up, whether these were explicitly outlined or not. The irony here, of course, is that by continuing to obtain signatures from their rural or remote beneficiaries, most of these organizations were negating some of the very benefits of using mobile money in the first place, specifically travel costs and staff time. Another issue related to receipts for Bulk Payment users is that many of the partners want to cover the cost of the first cash withdrawal for their users, but obtaining records that reflect that extra expense cannot currently be done within the Safaricom system.

Another, somewhat unexpected, issue that arose regarding large volumes of transfer payments was concern among some agents around conducting greater than normal transactions and thus triggering a “suspicious activity report” from Safaricom. Given the strict monitoring and fraud regime that Safaricom imposes on its agents, none of them wanted to find themselves subject to investigation, even for perfectly legitimate business, nor did they want their names included in monitoring reports to the CBK. In this particular case, the organization in question wasn’t aware that they could use a Bulk Payment Service offered by Safaricom, so they attempted to place high volumes of P2P transfers with the help of a supermarket agent chain, where the issue arose. Better information would have helped the partner here, but it’s noteworthy that the monitoring regime is enforced enough to impel caution on the part of agents.

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 36 A final topic that the partners we spoke with were not entirely satisfied with was Safaricom’s policy on recourse, should money be inadvertently sent to the wrong mobile account number (even after the initial validation process). Because of problems in the past around collusion, Safaricom’s policy now is that if the money is still in the mistaken recipient’s wallet, the transfer will be reversed; however, if the money has already been cashed out or sent to someone else, nothing can (or will) be done. (This is one area where banks providing intermediary services between client accounts and Safaricom’s Bulk Payments service are voluntarily taking on liability for this loss, and given the usually very small amounts concerned, it is an inexpensive way for the banks to enhance their service offering and increase their goodwill with clients.)

Despite the many challenges faced when implementing mobile money, when asked what they would do differently, all the partners and organizations interviewed stated that they would have started using mobile money sooner than they did, and wished they had known more about its uses and benefits.

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 37 SECTION V. KEY SECTORAL ISSUES AND CHALLENGES

Looking at the snapshot of experiences of USAID/Kenya’s implementing partners and other NGOs in using mobile money in their programs, there are a handful of key issues and challenges facing the entire sector that are worth highlighting, some of which have already been discussed. These can be summarized as follows:

- Some customers are constrained by Safaricom’s monopoly and inflexibility around service offerings, and the difficulty of dealing with Safaricom without personal connections. As one interviewee put it, it is very hard to “maneuver the Safaricom maze.” A related issue here is that the Safaricom help centre, even for corporate services such as Bulk Payments and Bill Pay, is only open from 8 am to 5 pm each day.

- Safaricom’s platform limitations for those that want direct integration present multiple challenges - access, complexity and cost.

- The general knowledge level about how mobile can be used and how to integrate it varies significantly among organizations. Many could benefit from education on where to find resources to help, not just with mobile money but also around process improvement in their accounting systems to facilitate mobile money usage.

- Partner organizations would benefit from consistent messaging, confirmation around use of mobile money in program implementation and legitimacy of mobile money electronics records as accounting records. This applies not just to USAID but other donors as well since many programs are funded by multiple donors.

- There is currently low market penetration by other MNOs. While the other MNOs are in many ways easier to deal with and have technical advantages over the Safaricom M-Pesa system38, their very low coverage and market share render them almost irrelevant at this time for organizations seeking solutions with broad coverage.

- Key program areas, especially remote, drought-ridden regions, often have poor mobile network coverage, lower mobile phone penetration, low literacy levels and will require greater training before significant adoption rates can be attained.

38 Airtel, Orange and Yu all have platforms that utilize open APIs for easy integration and tighter security protocols; for example, Airtel’s platform uses ISO 8583 for data transfer, in keeping with worldwide banking data security standards.

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 38 APPENDIX I. EARLY CHALLENGES FOR MICROFINANCE INSTITUTIONS WITH MOBILE MONEY

While there are significant benefits to be gained by the use of m-commerce by MFIs, especially in rural areas, in the form of cost savings, efficiency, fraud and error reduction, and client security and convenience, most attempts around the world to do so have been unsuccessful or are progressing very slowly. The reasons for this are varied, but center largely on the lack of reliable information links between the mobile network operators’ (MNOs) databases and the MFI’s management information systems (MIS)39 and on the lack of specialized technical skills to implement mobile banking models or tap into existing platforms40. Without an automatic software link that can record transaction information in real time between the mobile network operator and the MFI's own information systems, the main benefits of mobile money are not going to be realized. In the Philippines, for example, an initiative to let customers of rural banks use Globe Telecom's popular G-Cash instead of cash was constrained in part by the poor quality of the rural banks’ core banking systems41. Introducing new technologies such as software links is also difficult for many rural MFIs because they often work in an environment of frequent power outages and unreliable IT systems.

Not all problems have been technical in nature, however. Many MFI clients appreciate and benefit from regular contact with their loan officers and fellow clients, and are therefore resistant to change the way they behave and interact (as are some of the MFIs themselves, for the same reason). In Kenya, an MFI that substituted group loan cash repayments with repayments via M-Pesa found that group loan borrowers made fewer on-time repayments under the new system. Customers no longer attended the group meetings that had helped to keep up repayment pressure and the loan officers ended up with more work than before chasing repayments 42.

Other problems faced are more economic in nature. First, the full advantages of m-commerce are only realized once the majority of the MFI’s customers have converted to the service, better known as the "network effect," meaning it’s difficult to run a cost efficient pilot with just a small sample of customers. Also, the relatively high transaction fees charged by mobile operators have inhibited uptake by lower income users. Mobile operators have typically targeted their mobile payments fees to the remittance business, with its less frequent, larger payments, rather than microloan payments that are typically smaller and on a set schedule. Operators such as Safaricom in Kenya and Roshan in Afghanistan,

39 M. Pickens, "Can M-Pesa Work for Microfinance Clients?" CGAP, June 2008 40 G. Ivatury, I. Mas, "The Early Experience with Branchless Banking," CGAP Focus Note No. 46, April 2008 41 Ivatury & Mas, 2008 42 Ivatury & Mas, 2008

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 39 however, started to charge special lower rates for their MFI partner clients, as a means of addressing the pricing issue they had in earlier MFI pilots43.

Despite the barriers, the benefits to be gained by successfully implementing m- commerce into MFI operations are potentially large, in both financial and customer service terms, and efforts continue to prove the concept. In addition to ongoing programs in Kenya, the Philippines and South Africa, Tameer Bank in Pakistan and XacBank in Mongolia are developing mobile banking programs in partnership with mobile operators to reach their rural clients. In India, SKS Microfinance has developed a mobile banking initiative in partnership with larger Andhra Bank as it seeks to expand its market among the unbanked, and in Ecuador, the Red Financiera Rural association of MFIs and cooperatives is planning to contract with a technology provider to build and maintain both core banking systems and a mobile banking channel on behalf of the group44.

43 M. Pickens, CGAP 2008 44 Ivatury & Mas, 2008

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 40 APPENDIX II. LIST OF INTERVIEWEES DURING OCTOBER 2011 ASSESSMENT TRIP

Mobile Network Operators (MNOs) Changamka Safaricom Airtel USAID/Kenya Implementing Orange Partners Yu DAI/FIRM (ABEO) Fintrac (ABEO) Financial Institutions NRT (ABEO) Equity Bank RTI (OPH) CfC Stanbic Kenya Pharma (OPH) Citibank AMPATH (OPH) Juhudi Kilimo Fanikisha (OPH) Yes Youth Can (EDY) Stakeholder Groups IED (DG) Cash Learning Partnership (CALP) PACT (DG) Financial Services Deepening Trust CGD/ELOG (DG) (FSD) KTI (OTI) iHub, mLab COMPETE (EA) Summit Strategies SUWASA (EA) Syngenta Food for Peace (EA)

Government of Kenya PS Bitange Ndemo, MIC Donors/NGOs ICT Board of Kenya FSD (DFID) World Vision SME Concern Worldwide KickStart Bridges International Grundfos Technoserve Kopokopo

BETTER THAN CASH: KENYA MOBILE MONEY MARKET ASSESSMENT 41

APPENDIX III. IMPLEMENTING PARTNER MOBILE MONEY USE

Partner Description Mobile Money Region Funding/Timeframe Use AMPATH Healthcare Using M-Pesa Bulk Western Kenya partnership Payment to pay (HQ: Eldoret) delivering health staff and clients, care services, including CHWs; October 2007 – training and transacting about September 2012 research Ks4 million per month; also set up as M-Pesa agent CGD DG partner Trialed mobile Countrywide supporting voter money to pay 450 registration, supervisors & 10K training and monitors during election 2010 referendum; observations. used P2P due to lack of knowledge around Bulk Payment; want to use for next year’s elections Fanikisha Program aimed Not using yet but Countrywide $41 million (PEPFAR) at strengthening interested in more CSOs that information July 2011 – July 2016 provide health services Fintrac Supports No official project Countrywide agricultural value use yet, but some chain players value chain partners are using it to pay salaries (Mace Food, Equator Kenya); are also supporting partners who wish to implement mobile money FIRM Works with Several MFI Countrywide financial members using institutions in mobile money, Kenya on primarily for strengthening repayments: rural finance and KWFT, Faulu, financial SMEP, Juhudi, inclusion; Musoni provides loan (disbursements guarantees, also); agricultural strategy, product development and ICT

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Food for Distributing food Cash transfers via Northern, Peace aid (Ks3.5m) Safaricom, Equity Western drought and cash Bank & their offline areas (Ks1.25m), of POS which about 800K is UCT Horn Relief Humanitarian Using M-Pesa to Kenya, Somalia, organization pay 2,800 Sudan working on food beneficiaries security and livelihoods (with an emphasis on cash based responses), natural resource management, education (formal and non- formal), WASH, and humanitarian response. IED Promote Used to pay Countrywide September 2003 democratic monitors during elections in 2010 referendum; Kenya and the used P2P function Africa region only, involving lots through of manual monitoring and transfers, & which observation of all also led to agent aspects of the liquidity issues; electoral and looking to use Bulk democratic Payment going processes; forward provision of civic/voter education; technical support to key institutions of governance; and research and advocacy Intrahealth Working to Use M-Pesa for Northern Kenya improve the staff travel costs, hiring, training & paying workshop capacity of participants; want health workers, to use M-Pesa for esp in remote creation of areas community of CHWs, and possibly offer insurance product through M-Pesa KDLP Program to Garissa, Wajir, $10M

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enhance trade in Mandera, Ijara livestock and and Tana River September 2010 – livestock Districts June 2013 products, with the goal of raising both income and food security for a minimum of 50,000 pastoralist households KTI Program Had used M-Pesa Western Kenya designed to in 2010 for paying identify and staff, workshop support critical participants in voter initiatives in registration support of the campaigns; used National Accord, P2P only at time, accountability, wasn’t aware of and the Agenda Bulk Payment IV reforms service MACE Foods Private sector Uses M-Pesa’s Western, partner working Bulk Payment Nyanza and Rift with smallholder service to pay Valley Provinces farmers to export women farmers chili peppers and vegetables MCHIP MCHIP aims to Uses M-Pesa and Bondo District accelerate the other mobile money reduction of services to pay maternal, CHWs newborn and child mortality in Kenya through the introduction, development and scale-up of high-impact interventions. NRT Umbrella Will soon pilot M- Central-Northern $3.2M organization that Pesa’s Bulk Kenya (17 oversees local Payment service conservancies, Three year program conservancies within its NRT 5 districts) ending June 2012 owned and Trading program to managed by pay craftswomen local for their work; also communities; using Pay Bill activities include service for building repayment of MFI capacity, loans; working ensuring directly with financial Safaricom and transparency, Equity Bank; also and improving looking at livestock

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local security for purchase program; both pastoralists anticipating approx. and tourists; also Ks60K savings per provides a month (fuel-Ks30K, means for Ks10-15K staff granting allowances, rest microfinance vehicle loans maintenance) One Acre Working with Introduced Kilimo Western Kenya $76K Fund 50,000 Salama crop January 2011- smallholder insurance product December 2011 farmers in Kenya in 2010, which is and Rwanda to based on M-Pesa access regional system staple foods markets for maize and beans PACT DG partner Using M-Pesa, Countrywide running Kenya through CBA bank, Civil Society to pay workshop September 2006 - Strengthening attendees and staff September 2012 Program; costs, including per activities include diems, travel; workshops, reduced costs of focus groups, cash disbursement training & by 90% support TIST Tree planting Using M-Pesa to program pay stipends to TIST members for planting and caring for trees RTI Malaria Had used security Migori, spraying, co to distribute Rachuonyo, education; part payments to Nyando of President’s sprayers, switched Malaria Initiative to M-Pesa 2010, in (PMI) conjunction with CBA bank, to pay 2,435 temporary staff Yes Youth Setting up Want the entire Countrywide $12M July 2011 Can village level program to be community youth mobile-money programs for based, working with youth Safaricom, will use engagement, M-Pesa for loan including disbursement & National ID repayment registration, bank account registration, micro-enterprise training and

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support, including grants and loans, social media apps

APPENDIX IV. KENYAN MOBILE MONEY REGULATORY FRAMEWORK

In Kenya, mobile financial services have evolved in a largely undefined regulatory space. The Central Bank of Kenya (CBK) has been informed and watchful, and has provided oversight and deliberate guidance from the very beginning of the industry. The relationship between the CBK and M-Pesa has evolved through willing collaboration and innovation in an entirely new domain in financial services. In this context, the CBK and M-Pesa have addressed emerging challenges in introduction of mobile payments services as well as consumer protection that have attracted international interest and recognition. However, the consumer protection measures that exist are as yet not codified in law or regulation in the industry.

When Safaricom approached the CBK in early 2007, there were no laws governing a mobile money service like M-Pesa, so the CBK issued a “Letter of No Objection,” and M-Pesa was launched the following month. The CBK provides guidance to mobile money under Article 4 of the Banking Act, which covers Payment Systems, rather than banks. As such, it is the National Payment Systems Division (NPSD) of the CBK that provides oversight, not the Banking Supervision Department45. As a safeguard, however, CBK exercises full supervisory oversight over the trust accounts for mobile financial services providers, which are held at commercial banks. This effectively sequesters the float and protects it against any eventual financial failure of M-Pesa. This also precludes M-Pesa from earning the interest on the float46.

At the end of 2008, with the huge success of M-Pesa and the growing concern of the Kenyan Bankers Association, the Ministry of Finance asked that the CBK conduct a risk assessment of M-Pesa, which was done and published in the newspapers and Kenya Gazette in early 2009, basically saying that the CBK is satisfied with the risk situation and that they don’t consider M-Pesa to be a banking business.

In the last few years, with the introduction of three additional mobile money service providers47 and the huge growth of the sector, the CBK has chosen to

45 The NPSD traditionally focuses on the integrity of the IT platforms and service delivery systems, in line with BIS guidelines, rather than consumer protection and risk. 46 The interest on the float is channeled into a charitable account. 47 The new mobile money services were approved and supervised under individual Letters of No Objection.

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introduce a more formal regulatory framework over the entire branchless banking sector. The actions taken to date include the following:

- The Proceeds of Crime & Anti-Money Laundering Act of 2009 was passed, and went into effect July 2010.

- In 2010, the CBK issued “Guidelines on Agent Banking,” which outline the rules around who can act as a bank agent (which wasn’t allowed previously for non-bank entities). These guidelines were later extended to MFIs and SACCOs. Where banks are involved, should someone (e.g., an NGO) wish to act as a mobile money agent, they will have to adhere to the new guidelines. As of June 2011, the CBK had granted approval to 6 commercial banks to roll out agent banking, and 6,513 agents had been approved48.

- In late 2010, the MOF and the Consumer Protection Task Force (CPT), in conjunction with CGAP, conducted a study into consumer protection across all financial services in Kenya49. Their final report recommendations included: better disclosure with regard to pricing & plain language; dispute resolution mechanisms & third-party recourse; regulations clarifying liability and responsibility for 3rd party agents; and public reporting of performance. - - In 2010, the telecoms regulator, CCK, issued its own consumer protection guidelines for the telecommunications sector, which would include mobile money services (although it’s not clear how they’re meant to be enforced).

- In March 2011, the CBK issued a draft of the Retail Transfer Regulation 2011, commonly referred to as the “e-regs,” which is a set of comprehensive regulations for all e-money providers, including mobile money. It will be the main regulatory guideline for the sector, and further defines the players, increases the capitalization requirements for non-bank providers, changes some of the transfer caps, etc.

- Finally, in 2011, the CBK submitted the National Payments System Bill 2011, which will put into law the framework under which all the new regulations will be governed. (This Bill has been in the works for a few years, but opposition from the media sector has prevented it from being put forward. It is expected to pass Parliament this year.) The Bill covers all electronic payment systems and instruments, including the RTGS, online and mobile money payment services, and aims to tighten consumer protections if a mobile or online service provider becomes insolvent.

48 CBK Annual Report 2010-2011. 49 FSD Kenya, Consumer Protection Diagnostic Study Kenya, January 2011.

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APPENDIX V. DESCRIPTION OF MOBILE MONEY OPERATORS

Company Fact Sheet - Safaricom Ltd

Provision of mobile telecommunication services; voice, Business Description messaging, data and fixed broadband Established April 3, 1997 Employees 2801 employees as at August 23 2011 17.5M Mobile Subscribers

Safaricom House, Waiyaki Way, Westlands P.O Box Head Office 46350, Nairobi

www.safaricom.co.ke Website

History Safaricom, which started as a department of Kenya Posts & Telecommunications Corporation, the former monopoly operator, launched operations in 1993 based on an analogue ETACS network and was upgraded to GSM in 1996 (license awarded in 1999). Until 20 December 2007, the GoK shares were held by Telkom Kenya Limited (“TKL”), which was a state corporation under the Act. Following the Offer and sale of 25% of the issued shares in Safaricom held by the GoK to the public in March 2008, the GoK ceased to have a controlling interest in Safaricom under the State Corporations Act and therefore the provisions of the State Corporations Act shall no longer apply to it.

Description Safaricom launched M-Pesa on March 6th, 2007, in partnership with Vodafone. It was the first mobile money system in Kenya. In addition to person-to-person transfers, M- Pesa can be used to pay bills, purchase goods, buy airtime, and, with the launch of M- Kesho, move funds to and from an interest-bearing account with Equity Bank.

A couple other mobile money services offered by M-Pesa (but less relevant to the aid and donor world for purposes of this report), are International Money Transfer and the M-Pesa Prepay Safari Card. International Money Transfer is a service made available through Western Union and Safaricom, launched in March 2011, whereby users can receive transfers from abroad, which are then deposited directly to the user’s M-Pesa account. Transfer value limits apply, depending on the country of origin where the funds are coming from, but Safaricom’s own receipt limits in this case are Ks35,000. The M-Pesa Prepay Safari Card is a prepaid Visa card, issued by I&M Bank, that needs to be pre-loaded, in Kenya shillings, and can be used at any Visa ATM worldwide or Visa branched merchants. Residual balances can be refunded at any I&M branch.

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Apr-11 Number of M-Pesa Customers 14,008,319 Number of Agent Outlets Countrywide 27,988

M-Pesa Tariffs Transaction Type Transaction range (KES) Transaction Fee (KES) Min Max

Value Movement Transactions

Deposit Cash 50 70,000 0

Cash transfers to registered users 50 100 10

101 35,000 30

35,001 70,000 60

Cash transfers to unregistered users 100 2,500 60 2,501 5,000 80

5,001 10,000 120

10,001 20,000 180 20,001 35,000 250

Registered User Cash Withdrawal 50 100 15

101 2,500 25 2,501 5,000 45

5,001 10,000 75

10,001 20,000 145 20,001 35,000 170

35,001 50,000 250

50,001 70,000 300

Unregistered User Cash Withdrawal 100 35,000 0

ATM Withdrawal Charges 200 2,500 30

2,501 5,000 60

5,001 10,000 100

10,001 20,000 175

Buy airtime (for self or other) 20 10,000 0

Information Transaction Change PIN N/A N/A 20 Show Balance N/A N/A 1

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Company Fact Sheet - Airtel Kenya Ltd

Business Description Telecommunications Established 2010 Mobile Subscribers 3.8M Parkside Towers, Mombasa Road, Nairobi, Head Office 00100 Kenya Website http://www.africa.airtel.com/kenya/

History Airtel Kenya Ltd operates as a mobile phone operator in Kenya. It offers various services, including prepaid plans, international roaming, local and international text messages, Internet access, directory enquires, voice mail, and SMS information. Airtel Kenya Ltd was formerly known as Zain Kenya Limited and changed its name in 2010 upon purchase by Bharti Airtel.

Description Formerly Zain Zap, Airtel Money is the second largest mobile money system in Kenya. Prior to its acquisition, Zain was focused on creating a “cashless society” whereby any number of needs could be met via mobile money. The following services are available on Airtel Money:

• Transfer money from one mobile phone to another mobile phone recipient on demand • Top up a mobile phone or another customer's mobile phone • Access and manage bank accounts • Pay utility bills

Airtel Money Tariffs

Transaction Type Transaction range (KES) Transaction Min Max Fee (KES)

Value Movement Transactions

Deposit Cash 50 70,000 0

Cash transfers to registered users 50 100 5

101 70,000 25

Cash transfers to unregistered users 101 35,000 25

Registered User Cash Withdrawal 50 100 15

101 2,500 25

2,501 5,000 45 5,001 10,000 75

10,001 20,000 145

20,001 35,000 170

35,001 50,000 250

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50,001 70,000 300

Unregistered User Cash Withdrawal 50 100 15

101 2,500 25

2,501 5,000 45

5,001 10,000 75

10,001 20,000 145

20,001 35,000 170

ATM Withdrawal Charges 101 2,500 40

2,501 5,000 55

5,001 10,000 85

10,001 20,000 175

Buy airtime (for self or other) N/A N/A 0

Information Transaction

Change PIN N/A N/A 20

Show Balance N/A N/A 1

Change Nickname N/A N/A 20

Transaction Reports N/A N/A 20

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Company facts - Telkom Kenya (T/A Orange)

Business Description Telecommunications Established April 1999 Type Private Mobile Subscribers 2.1M Teleposta Towers Building Ralph Bunche Head Office Road, Telkom Plaza, Nairobi 00100 Kenya Website http://www.telkom.co.ke/

History Telkom Kenya, trading under the Orange brand, was established as a telecommunications operator under the Companies Act in April 1999 and is the only integrated telecommunications solutions provider operating in Kenya. In December 2007, France Telecom acquired a 51% stake in incumbent Telkom Kenya through its holding company Orange East Africa (OrEA).

In September 2008, Telkom Kenya launched its mobile service, and it is now a fixed, mobile and Internet operator that provides services to business customers and consumers. Orange is the commercial brand used for all mobile and Internet services.

Description Orange Money launched in late 2010 in association with Equity Bank. Instead of offering the same features as M-Pesa, Airtel Money, or yuCash, Orange opted to create a de facto front-end for Equity Bank accounts, allowing it to exceed regular transaction and m-wallet balance thresholds. In conversations, the Orange Money director stated that they were particularly interested in pursuing opportunities in the mHealth and eHealth sectors.

Orange Tariffs Transaction Type Transaction range (KES) Transaction Min Max Fee (KES)

Value Movement Transactions

Deposit Cash 100 100,000 0

Cash transfers to registered users 100 35,000 30

35,001 50,000 40

50,001 100,000 50

Cash transfers to unregistered users 100 2,500 70 2,501 5,000 90

5,001 10,000 155

10,001 20,000 305 20,001 35,000 355

35,001 50,000 390

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50,001 100,000 450

Registered User Cash Withdrawal 100 2,500 25

2,501 5,000 45

5,001 10,000 75

10,001 20,000 145

20,001 35,000 170

35,001 50,000 195

50,001 100,000 225

Unregistered User Cash Withdrawal 100 100,000 0

ATM Withdrawal Charges 100 2,500 40

2,501 5,000 60

5,001 10,000 100

10,001 40,000 175

Buy airtime (for self or other) 10 10,000 0

Information Transaction

Change PIN N/A N/A 0

Show Balance N/A N/A 5

Mini Statement request N/A N/A 5

Stock Price Inquiries N/A N/A 0

Forex Rates Inquiries N/A N/A 0

Invite Rafiki Request N/A N/A 0

Bank Transactions

Transfer to Equity Account 100 35,000 30

35,001 50,000 40

50,001 100,000 50

Transfer to Any Bank Account 100 35,000 400 35,001 50,000 450

50,001 100,000 500

Transfer from My Equity Account to 100 35,000 30 Orange Money 35,001 50,000 40

50,001 100,000 50

Full Bank Statement N/A N/A 50 per page

Cheque Book Request N/A N/A 14.75 per leaf

Stop Card Request N/A N/A 0

Stop Cheque Request N/A N/A 0

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Company Fact sheet - Essar Telecom Kenya Limited (ETKL)

Business Description Telecommunications Established 2008 Type Private Mobile Subscribers 1.6M Essar House Africa, Brookside Grove Muguga Green Lane Westlands, Nairobi Head Office 00100 Kenya Website http://www.yu.co.ke

History Essar Telecom Kenya Limited (ETKL) is a unit of India based Essar Group. ETKL launched a mobile service network under the brand “yu” in November 2008 in Kenya. Description Essar yuCash launched in December 2009 and is “powered” by Obopay, a mobile money platform and service provider. yuCash offers some standard features such as person-to-person transfer and balance inquiry as well as some unique features like requesting money from another user, adding a short message to a payment, and inviting friends to join. yuCash is also unique insofar as it offers five different front-ends: WAP, SMS, Voice, USSD, and STK.

yuCash Tariffs

Transaction Type Transaction range (KES) Transaction Min Max Fee (KES)

Value Movement Transactions

Deposit Cash 100 2,500 0

2,501 5,000 5,001 10,000

10,001 20,000

20,001 35,000

Cash transfers to registered users 100 35,000 0

Registered User Cash Withdrawal 100 2,500 20

2,501 5,000 40

5,001 10,000 65 10,001 20,000 130

20,001 35,000 150

Unregistered User Cash Withdrawal 100 2,500 40 2,501 5,000 60

5,001 10,000 125

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10,001 20,000 275

20,001 35,000 325

Buy airtime (for self or other) 10 10,000 0

Information Transaction

Change PIN N/A N/A 2

Show Balance N/A N/A 1

Update Menu N/A N/A 0

Request Money N/A N/A 0

Invite Friend N/A N/A 0

Show History N/A N/A 5

Help N/A N/A 0

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APPENDIX VI. EMERGING MOBILE MONEY “ECOSYSTEM” PLAYERS

Mobile Money Description Website Applications iPay - online iPay is an easy-to-use payments processing tool that incorporates http://www.intrepid.co.ke/i mobile money M-Pesa, Airtel Money and yuCash. -pay-mobile-transaction- product processing.html The three money transfer systems are packaged into an online payment processing system that will allows payments to be received off a website.

PesaPal A payment platform that enables Kenyans to buy and sell on the https://www.pesapal.com/ Internet using M-Pesa, Zap and Credit Cards. M-Payer MPAYER manages Mobile payments where transactions are http://zegetech.com/portal processed on demand as opposed to scheduled processing. It /portfolio/ manages corporate collection accounts (MPESA-Pay Bill and ZAP- Nickname). This results in increased transaction speeds and enhanced accuracy due to direct system integration with organizations financial systems Paynet Group PesaPoint will allow a Financial Institution without an existing ATM http://www.pesapoint.co.k network to offer an ATM service to its customer base. Financial e/index.asp institutions with an existing ATM network will provide their customers with convenience of cash access in many additional ATM locations, once they join the PesaPoint network. Musoni Musoni is at the cutting edge of microfinance, enabling loan disbursal http://www.musoni.co.ke/ and repayment via Safaricom M-Pesa and Airtel Money Lipuka Lipuka integrates bank & payment channels to enable music http://www.cellulant.com/i downloads, bill payments and info services via WAP. ndex.html

Cellulant is a mobile commerce company that manages, delivers and bills for digital content and commerce services actualized over telecom networks MOCA Ex-ZungukaPay, which enables online merchants to accept mobile http://pay.zunguka.com/ money payments, Google Checkout & various credit/debit cards. Has open API for integration. Moca enables customers to buy “Moca credits” via mobile money, which can then be used to pay for goods & services on partner websites, e.g., KeleleMobile JamboPay JamboPay is an online payment gateway that allows users to https://www.jambopay.co securely make and receive payments through mobile phone over m/default.aspx internet.

JamboPay allows for mobile payments such as M-Pesa, Airtel Money and YU-CASH, Bank payments, Visa and MasterCard Debit and Credit cards. Kopo Kopo Kopo Kopo offers a low-cost, subscription-based software platform http://www.kopokopo.com that enables enterprises to accept all brands of mobile money payments from their customers. Mobikash An independent mobile commerce, mobile banking & payment http://www.mobikash.com service provider that allows users to manage & perform a wide range /index.php?inhalt=home of financial transactions from their mobile phone & other channels, e.g., internet, POS, ATMs. Compatible with any mobile phone and can be linked to banks, MFIs, SACCOs & bill issuers.

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Currently gives Kenyans on any mobile network real-time access to accounts at participating banks, including Post Bank, National Bank of Kenya, & Trans National Bank. Flexus Ex PesaPot Holdings; hosted core banking and financial http://www.flexus- management platform for MFIs, credit unions & community benefit technologies.com/ organizations called Kopesha. Also offers a “universal mobile money transfer & payment” service called CaribPay Jipange Initiative of Mobile Ventures Kenya Ltd., a subsidiary of Signal Point http://jipangekusave.com/ KuSave Partners, launched in partnership with FSD Kenya & CGAP; aims to extend affordable micro-savings & micro-credit via mobile phone

Jipange KuSave is an initiative of Mobile Ventures Kenya Ltd., a subsidiary of Signal Point Partners. Launched as a pilot in 2010 in partnership with FSD Kenya and CGAP, Jipange KuSave aims to extend affordable micro-savings and micro-credit to the ‘mwanainchi’ (Kiswahili for ‘common man’) via mobile phones Tangaza Managed by Mobile Pay Limited and a network of independent https://www.tangaza321.c trustees, Tangaza enables both local and international money om/tan/ transfer as well as services like utility bill payment and remote airtime purchase. Tangaza is accessible via USSD and the internet and works across multiple mobile networks SPOT Cash Spotcash is a modern state-of-the-art SMS-based system that https://spotcash.co.ke/sp enables withdrawal of money from a SACCO member's otcash/ savings/FOSA account and loading it straight onto their M-Pesa account PewaHewa PewaHewa is similar to the iTunes Store insofar as you can browse http://www.pewahewa.co for musical artists, albums, genres, etc. and purchase songs via m/ mobile money. PewaHewa is powered by iPay.

Pewahewa.com is an online music store that seeks to empower local musicians by making their music not only easily accessible for their fans, but also as affordable as possible.

By being the first online music store in the region to offer mobile money platforms (Zap and M-Pesa) to its users, Pewahewa.com has pioneered new ground and opened artists up to a whole new world of music distribution

Kalahari Often referred to as “the Amazon.com of Africa”, Kalahari offers a http://www.kalahari.com/ wide range of online goods and services, which customers can pay for via Safaricom M-Pesa. Kilimo Salama Kilimo Salama, Kiswahili for “safe farming”, is a crop insurance http://kilimosalama.wordp product offered by the Sygenta Foundation for Sustainable ress.com/ Agriculture. Kilimo Salama enables farmers to pay crop insurance premiums and receipts payouts via Safaricom M-Pesa Elma Elma is a mobile /online payment gateway for Kenya, done by Craft http://www.elma.bz/ Silicon in conjunction with some selected banks. The service is almost ready to launch (it is undergoing final testing). Reportedly, it is a mobile application (that you download) that would allow you to shop and make payments (cable TV, power & water etc) from your mobile phone, using your Elma account, which would be linked to your bank account(s). It should also allow you to top up your M-Pesa account from your bank account (but not the other way), pay school

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fees, make donations (to charity for example) etc

APPENDIX VII. MOBILE MONEY TARIFF COMPARISONS

Transaction Fees Value Movement Transactions Transaction Type min-max M-Pesa Airtel Orange yuCash Money Money

Deposit Cash 50-100 0 0 n/a n/a 100-35,000 0 0 0 0 35,001-70,000 0 0 0 n/a 70,001- n/a n/a 0 n/a 100,000

Cash Transfers to Registered Users 50-100 10 5 n/a n/a 100-35,000 30 25 30 0 35,001-50,000 60 25 40 n/a 50,001-70,000 60 25 50 n/a 70,001- n/a n/a 50 n/a 100,000

Cash Transfers to Unregistered 100-2,500 60 25 70 n/a Users 2,501-5,000 80 25 90 n/a 5,001-10,000 120 25 155 n/a 10,001-20,000 180 25 305 n/a 20,001-35,000 250 25 355 n/a 35,001-50,000 n/a n/a 390 n/a 50,001-70,000 n/a n/a 450 n/a

Registered User Cash Withdrawal 50-100 15 15 n/a n/a 100-2,500 25 25 25 20 2,501-5,000 45 45 45 40 5,001-10,000 75 75 75 65 10,001-20,000 145 145 145 130 20,001-35,000 170 170 170 150 35,001-50,000 250 250 195 n/a 50,001-70,000 300 300 225 n/a 70,001- n/a n/a 225 n/a 100,000

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Unregistered User Cash Withdrawal 50-100 n/a 15 n/a n/a 100-2,500 0 25 0 40 2,501-5,000 0 45 0 60 5,001-10,000 0 75 0 125 10,001-20,000 0 145 0 275 20,001-35,000 0 170 0 325 35,001- n/a n/a 0 n/a 100,000 ATM Withdrawal 100-199 n/a 40 40 n/a 200-1000 30 40 40 n/a 1001-2500 30 40 40 n/a 2501-5000 60 55 60 n/a 5001-10000 100 85 100 n/a 10001-20000 175 175 175 n/a 20001-40000 n/a n/a 175 n/a

Buy airtime 10-19 n/a 0 n/a 0 20-10000 0 0 0 0

Transaction Fees

Information Transactions Transaction Type min- M-Pesa Airtel Orange yuCash max Money Money Change PIN n/a 20 20 0 2 Check Balance n/a 1 1 5 1 Mini Statement Request n/a n/a 20 5 n/a Stock Prices Inquires n/a n/a 0 0 n/a Forex Rates Inquires n/a n/a n/a 0 n/a Invite Friend Request n/a n/a n/a 0 0 Request Money n/a n/a n/a n/a 0 Update Menu n/a n/a n/a n/a 0 Show History n/a n/a n/a n/a 5 Help n/a n/a n/a n/a 0 Change Nickname n/a n/a 20 0 n/a

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Cash Transfers to Registered Users

70 60 50 40 30 20 10 0 Transaction Fees (KES)

m-pesa airtel money orange money yuCash

Cash Transfers to Unregistered Users

500 400 300 200 100 0 Transaction Fees (KES)

m-pesa airtel money orange money

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Registered User Cash Withdrawal

350 300 250 200 150 100 50 0

Transaction Fees (KES)

m-pesa airtel money orange money yuCash

Unregistered User Cash Withdrawal 350 300 250 200 150 100 50 0 Transaction Fees (KES)

m-pesa airtel money orange money yuCash

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ATM Withdrawal

200 150 100 50 0 Transaction Fees (KES)

m-pesa airtel money orange money

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appendix viiI. MOBILE MARKET STATISTICS

Mobile Subscribers

20 18 16 Millions 14 12 mobile subscribers 10 8 mobile money 6 subscribers 4 2 0 m-pesa airtel orange yuCash money money

Mobile subscribers Mobile Money subscribers M-Pesa 17,500,000 14,000,000 Airtel 3,800,000 4,000,000 Money Orange 2,100,000 115,000 Money yuCash 1,600,000 1,500,000

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Mobile Money Market Share

9% 6% m-pesa

15% airtel money orange money

70% yuCash

Mobile Money Market Share (subscribers) M-Pesa 69.89% Airtel 15.20% Money Orange 6.37% Money yuCash 8.50%

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Mobile Money Agents

14% 27% m-pesa Airtel Money Orange Money 17% 42% yuCash

Mobile Money Agents M-Pesa 28000

Airtel 8600

Money

Orange 3500 Money yuCash 5400

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